Highlights
- Private companies joining the scrubber league as IMO 2020 deadline approaches
- Two large listed entities install hybrid ready scrubbers
- Installation of scrubbers leads to increased cash flow
Introduction
As the IMO 2020 deadline approaches, the interest in scrubbers has surged with an increasing number of private companies joining the scrubber league.
Scrubber analysis
Leading financial analysts reported their observation on the economics of scrubber market. Two large listed entities, Scorpio Bulk (SALT) and Scorpio Tankers (STNG) have announced their decision to install hybrid ready scrubbers. This project is underway; tersely worded regulatory filings suggested that financing needs would be “material” but little else. A Scorpio executive, speaking at a late September industry gathering, filled in a few of the blanks, saying that more than 100 vessels would be retrofitted, within the time frame stretching into mid-2020.
Financial analysis
Raising finance should not be a problem for Scorpio companies. A competitor on the dry side, Star Bulk (SBLK), which came onboard the scrubber trend earlier in 2018, had put a price tag of circa $2m each on scrubbers, which if correct, suggests a capex lump for the Scorpio entities of around $200m.
The Scorpio companies have recently raised liquidity through sale/leaseback transactions, as well through conventional bank credits; in early October, SALT announced a $90m finance deal with a banking stalwarts Nordea and DVB. In the days following the scrubber news release, STNG announced that it would be raising $250m, in a new common shares offering. BofA Merrill Lynch, and BTIG, LLC, a new player making a big splash on the ship finance scene, are acting as joint book-running managers and Clarksons Platou Securities, Inc. is acting as Senior Manager for the Offering.
Installation of scrubbers leads to increased cash flow
On the equity side, it would seem that scrubbers have been salutary, at least in the case of SBLK. In an early September piece recommending SBLK shares, JP Morgan analyst Noah Parquette wrote: “We view the commitment to install scrubbers in the full fleet as highly bullish” adding that: “Commitment to install scrubbers on 100% of the fleet should increase cash flow growth and also provide downside support.”
Analysts give thumbs up
This development, with Scorpio, reportedly alluding to business benefits of scrubbers, and perhaps positive reactions from the analyst community provide considerable enthusiasm to other ship owners to retrofit their vessels with scrubber technology.
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Source: Seatrade Maritime
